Why wasn’t it “the economy, stupid” in 1997?

At the start of September, Mike Smithson drew attention to the improving figures on economic optimism – and how they haven’t been accompanied by a revival in Labour’s political fortunes:

Like in 1997 the fact the index is “in the black” seems to be having
no impact on the incumbent government. The Tories had positive numbers but were thrown out by Blair’s landslide - now Labour is still struggling in the polls ...

At a conference of political academics at the weekend I had a long conversation with Professor John Curtice of Strathclyde University who is a strong proponent of this view. He told me “If it was the economy then the Tories would have been returned in 1997 with an increased majority.

The Clinton Presidential campaign of 1992 may have coined the phrase, “It’s the economy, stupid” but it is a political view with a long heritage in British politics. It was Harold Wilson who said, “All political history shows that the standing of the government and its ability to hold the confidence of the electorate at the general election depend on the success of its economic policy.”

So what did happen in 1997? After all, the period 1992-97 was packed with high profile economic news that had traumatic effects on millions. Sterling crashed out of the ERM (Exchange Rate Mechanism) on “Black Wednesday” (16 September 1992), breaking the Conservatives’s reputation for economic competence.

Quite how traumatic the events of Black Wednesday were to the Conservative Party’s reputation are easy to overlook nearly twenty years on, but until then the century had seen four full-scale financial crises rocking the country’s economy – and every one had taken place under a Labour government. For the century’s fifth to take place with a Conservative in 10 Downing Street overturned what had been one of the essential features of British politics.

A deep recession followed by spending cuts and the government’s public support was pushed even lower as 22 tax rises introduced in the struggle to get the budget deficit under control.

Yet by 1997 the economic recovery was in its fourth year. This did not push John Major and the Conservatives back into the lead – or anywhere close to it. So were their political fortunes really not set by the economy?

Taking ICM’s figures, the Conservatives sunk from 41% in August 1992 to a low of 24% in March 1994. In that month, ICM changed its methodology and a second poll carried out at the same using its new methodology put the party on 28%. From there the party recovered to 33% in the final pre-election ICM poll and scoring 31% in the actual general election.

Gallup’s final pre-election poll also put the Conservatives on 33% (though over-estimated the Labour vote, giving a greater error on the Labour-Tory lead). Their methodology stayed the same through the Parliament, tracking the Tories from 40.5% in August 1992 to a low of 20% in June 1995.

Either way, the broad picture is the same – a prolonged and sharp decline in the Conservative support during bad economic times, followed by a much smaller subsequent revival. That doesn’t preclude 1997 having been the economy, stupid. It is a picture quite compatible with voters being heavily motivated by the economy – but making their judgements based on the damage to the Conservatives’s reputation by the ERM debacle, and by a desire to punish the government for the early 1990s recession. Add to that Labour’s transformation in its own image on economic policies, and a growing economy was easily overshadowed.

Polls asking people which issues were most important to them tracked significant increases in the numbers answering ‘health’ and ‘education’. However, this was simply the economy in another guise, for what drove up concern on those issues was financial shortages brought about by the recession of the early 1990s and the budget deficit it caused. So whilst by April 1996 only 34% of ex-Conservatives were telling Gallup that one of their “very important” reasons for switching was that the party was “making a mess of the economy”, the 66% who said the Government was “continuing to undermine the NHS” and the 55% who said that “public services – not just the NHS – continue to decline” were reacting to economic news too, via the medium of public spending restraint.

As David Butler and Dennis Kavannagh put it in The British Election of 1997:

To the surprise and disappointment of Conservative Central Office,
the economic recovery failed to fee through into support for the government. Voters’ economic optimism, the ‘feel-good factor’, was slow to rise. For this there were several possible reasons. The recession had been severe, and many people continued to be afflicted with problems such as anxiety over the security of their job or the negative equity of their house. It was only in 1996 that unemployment fell below 8 per cent. There remained a general sense of economic insecurity. As Spencer and Curtice observed, the recovery was marked by low inflation, more flexible and short-term work, and declining or only slow rising property prices. As a result voters felt less secure and optimistic than during pervious economic recoveries. Further it was recognised that the Conservatives had broken the promises on tax made at the election, and that recovery had only commenced once the government had been forced to abandon its initial policies ... In any case, the economy was not the only factor to affect the government’s popularity. It quite soon began to attract a reputation for incompetence.

Conservative popularity was undermined by steady drum beat of these other issues, including the moves to close large numbers of mines – ruled “unlawful and irrational” by the High Court, the organisational disasters at the Child Support Agency, mad cow disease and 12 ministerial resignations over personal behaviour. And then there were the deep splits over Europe.

What, if anything, does this tell us about Gordon Brown’s prospects? If your reputation for economic competence is broken and you are burdened with non-economic crisis after crisis, economic recovery is not enough to put your popularity back together again. Although Brown’s situation is marginally better – his repudiation of previous attitudes towards the financial markets is not quite in the same league as the Conservative repudiation not just of an economic strategy based on the ERM but also of years of rhetoric of tax – it is hard to see that it is better enough to allow him to succeed where John Major failed. Once the bad economic news has broken your reputation, recovering is not enough to put it back together again.